If you or your family member has taken an education loan for higher studies—such as an MBA, engineering, or medical degree—you may be eligible for a valuable tax benefit under Section 80E of the Income Tax Act.
This guide will help you understand how to claim education loan tax deduction, reduce your financial burden, and make informed financial decisions.
What is section 80E?
Section 80E of the Income Tax Act, 1961, allows individual taxpayers to claim a tax deduction on the interest paid on an education loan taken for higher education.
Key Highlights:
- Only interest on the education loan qualifies for the deduction, not the principal.
- The deduction can be claimed by the person repaying the loan, regardless of whether they are the student or a family member.
- The benefit applies to education loans taken for self, spouse, children, or a student for whom the individual is a legal guardian.
Who Can Claim Education Loan Tax Deduction under Section 80E?
To claim the deduction:
- You must be an individual taxpayer (not a company, firm, or HUF).
- The loan must be from a bank, NBFC, or an approved charitable institution.
- The loan should be for higher education, which includes any course pursued after Class 12 in India or abroad.
You can claim the deduction if the education loan is taken for:
- Your own higher education
- Your spouse’s education
- Your children’s education
- A student for whom you are the legal guardian
Loans from friends, relatives, or unrecognized lenders do not qualify for the Section 80E deduction.
You can claim a tax deduction under section 80E if you pay back an education loan. This means that either the parent or the student (whoever is repaying the loan) can take advantage of section 80E when filing their income tax return.
Eligible Loans under Section 80E
To qualify for this tax benefit:
- The loan must be from a recognized financial institution or charitable trust.
- It must be used for higher education in any field such as medicine, engineering, or management, in India or abroad.
- Foreign education is eligible, but the loan must be from an Indian lender.
Deduction Limit and Claim Period
| Feature | Details |
| Deduction Allowed On | Interest component of the EMI |
| Maximum Deduction Period | Up to 8 years from the start of repayment |
| Deduction Limit | No upper limit |
| Principal Component Covered? | No – Only interest qualifies |
You can claim the deduction starting from the financial year in which repayment begins, for a maximum of 8 consecutive years or until the interest is paid off—whichever is earlier.
If your annual income is ₹7.7 lakh and you paid ₹2.1 lakh in education loan interest, your taxable income reduces to ₹5.6 lakh—resulting in significant tax savings.
Documents Required to Claim Education Loan Tax Deduction
To claim deduction under Section 80E, keep the following documents ready:
- Interest Certificate from the bank/NBFC, clearly showing the interest paid during the financial year.
- Loan Sanction Letter and Repayment Schedule – not required during filing, but useful if scrutiny arises.
You don’t need to submit these while filing your Income Tax Return (ITR), but you must retain them for future reference.
If you’re a salaried employee, submit an estimate of interest to your employer at the start of the financial year to reduce TDS. If missed, you can still claim it while filing your return and get a tax refund.
How to Claim Deduction under Section 80E
Step-by-Step Process:
- Obtain Interest Certificate from your lender.
- File ITR and enter the interest amount under “Deductions – Section 80E.”
- No documents required to be uploaded—but keep them safely.
- (Optional) Submit estimated interest to your employer early in the year to reduce TDS.
Conclusion
Understanding how to claim education loan tax deduction under Section 80E can significantly reduce your tax liability. Whether you’re repaying your own education loan or one for your child or spouse, this benefit rewards responsible financial planning.
By knowing the eligibility for tax deduction on education loan repayment, ensuring the loan is from an approved institution, and keeping necessary documents in order, you can maximize your tax benefits.
Remember, every rupee saved is a step toward achieving your future goals. Make sure to use this provision wisely and consult a tax professional if needed.
Frequently Asked Questions About Section 80E
Here are some common doubts — explained.
Can I claim a tax deduction if I took a loan for studying abroad?
Yes, you can! As long as the education loan was taken from an Indian bank or approved financial institution, you can claim tax benefits under Section 80E — even if the studies are in a foreign country. Loans from foreign banks or unregistered lenders don’t qualify.
Do I get tax benefits on both the principal and interest of the education loan?
No, Section 80E only allows a tax deduction on the interest portion of the EMI. The principal repayment is not eligible for any deduction under this section.
Can my parents claim the deduction if I took the education loan?
Only the person who repays the loan can claim the deduction. So, if your parents are making the payments, they can claim the benefit — even if the loan was for your studies.
How long can I claim this deduction?
You can claim it for up to 8 years starting from the year you begin repaying the loan, or until the interest is fully paid — whichever comes first.
What documents do I need to claim the deduction under Section 80E?
To file your return, you’ll need an interest certificate from your bank that separates interest and principal — which helps in segregating principal and interest components of education loans accurately for tax calculation.
You need an interest certificate from the bank or lender that shows how much interest you paid during the year. You don’t need to upload it while filing, but keep it safe in case the tax department asks for proof later.
Can I claim 80E if I took out a loan for studying abroad?
Yes!
If you took an education loan from an Indian bank or financial institution for foreign studies — like doing an MBA in the US or UK — you can still claim Section 80E benefits.
But, if the loan is from a foreign bank or private lender abroad, you won’t get the tax benefit.
What if the loan is from my employer or a friend?
No deduction is allowed if the loan is taken from:
- Your employer
- A friend or relative
- Any unapproved lender
To qualify, the loan must come from a recognized Indian bank, NBFC, or approved charitable institution.
Can I claim both Section 80C and Section 80E?
Absolutely!
Section 80E is over and above the ₹1.5 lakh deduction limit of Section 80C.
So, you can claim:
- ₹1.5 lakh for LIC, PPF, tuition fees etc. under Section 80C
- Plus, full interest paid on an education loan under Section 80E
Can HUFs, Companies, or Partnership Firms claim this?
No.
Only individual taxpayers can claim this deduction. Hindu Undivided Families (HUFs), companies, or partnership firms are not eligible.
Even if you’re not the student, you can still claim the deduction if you’re the one repaying the loan. Parents and legal guardians often benefit from this!
